USD/CAD Price Analysis – Aug 27, 2024
Daily Price Outlook
During the early European hours on Tuesday, the USD/CAD currency pair failed to halt its downward trend and remained under pressure around 1.3466, hitting an intra-day low of 1.3463.
This decline in the USD/CAD pair could be attributed to the improving commodity-linked Canadian Dollar (CAD) amid rising crude oil prices.
On the other hand, the US Dollar initially saw modest gains but later turned bearish, possibly due to comments from key Federal Reserve (Fed) officials suggesting that interest rate cuts may be forthcoming.
Fed Chair Jerome Powell, speaking at Jackson Hole, hinted at potential policy adjustments and expressed confidence that inflation is nearing the Fed's 2% target.
Impact of Rising Oil Prices and US Interest Rate Expectations on USD/CAD
As we mentioned above, crude oil prices have surged due to concerns about potential supply disruptions. These fears are driven by the escalating conflict in the Middle East and the possible shutdown of Libyan oil fields.
Meanwhile, tensions remain high as Hamas rejected Israel's new conditions in ceasefire talks, insisting that Israel follow the terms set by US President Joe Biden and the UN Security Council.
Despite these worries, US Air Force General C.Q. Brown noted that fears of a broader conflict in the region have eased, with recent clashes between Israel and Hezbollah not escalating further.
Moreover, oil prices also gained support from growing expectations of US interest rate cuts. Such cuts could boost fuel demand by stimulating economic activity in the United States, the world's largest oil consumer.
Lower borrowing costs are likely to drive economic growth, increasing the need for oil and keeping prices elevated.
This news is likely to strengthen the Canadian Dollar (CAD) against the US Dollar (USD), pushing the USD/CAD pair lower. Rising oil prices benefit the CAD, while expectations of US interest rate cuts weaken the USD.
Potential US Interest Rate Cuts Weaken USD/CAD Pair
On the US front, the broad-based US Dollar failed to sustain its upward trend and turned bearish amid comments from Federal Reserve Chairman Jerome Powell.
Speaking at the Jackson Hole Symposium on Friday, Powell mentioned that "the time has come for policy to adjust," signaling a potential shift in interest rates. However, he did not provide specifics on when rate cuts would start or how large they might be.
In response, market expectations for a rate cut have grown. The CME FedWatch Tool shows that traders now fully anticipate at least a 25 basis point reduction by the Federal Reserve at its September meeting.
This indicates that investors believe the Fed will soon take action to support the economy, leading to a weaker US Dollar.
Therefore, this news is likely to weaken the US Dollar against the Canadian Dollar (CAD), leading to a decline in the USD/CAD pair.
The anticipation of US interest rate cuts reduces USD strength, while higher oil prices support the CAD.
USD/CAD - Technical Analysis
USD/CAD is currently trading at $1.34774, down 0.04% for the day, reflecting a mild bearish trend.
The pivot point to watch is $1.3516. If the pair continues to trade below this level, we could see further downside pressure, with immediate support at $1.3424.
Should this support break, the next levels to watch are $1.3360 and $1.3287, where additional buying interest may emerge.
The 50-day Exponential Moving Average (EMA) is sitting at $1.3612, which is above the current price and acts as a resistance level, reinforcing the bearish sentiment.
The Relative Strength Index (RSI) is at 23, indicating that the pair is in oversold territory. While this suggests that a rebound could be possible, the overall trend remains bearish as long as the price stays below the pivot point of $1.3516.
In conclusion, traders might consider selling below $1.35164, targeting a take profit around $1.34225, with a stop loss at $1.35731 to manage risk.
The immediate resistance levels to watch on the upside are $1.3574, $1.3633, and $1.3685. However, the bearish bias dominates unless the price breaks above these resistance levels.
Related News
AUD/USD Price Analysis – Aug 27, 2024
EUR/USD Price Analysis – Aug 26, 2024
Daily Price Outlook
During the European trading session, the EUR/USD currency pair failed to maintain its upward trend and turned bearish around the 1.1166 level, hitting an intra-day low of 1.1163.
The downward trend can be attributed to growing speculation that the European Central Bank (ECB) will reduce interest rates again in the September meeting. The ECB is also expected to deliver one more interest rate cut in the last quarter of this year.
This undermined the shared currency and contributed to the EUR/USD pair's losses. On the other hand, the bearish US dollar, driven by the dovish Fed, was seen as a key factor that limited any additional losses in the EUR/USD pair.
ECB Rate Cut Speculation and Economic Uncertainty Weigh on EUR/USD
On the EUR front, market expectations for ECB interest rate cuts in September have increased due to rising uncertainty over the Eurozone's economic outlook and slowing wage growth.
Although economic activity in the Eurozone showed unexpected growth in August, according to the flash HCOB PMI report, this was mainly driven by strong demand in France related to the upcoming Olympics in Paris.
Economists consider this as a temporary boost rather than a sign of long-term improvement.
Adding to the uncertainty, ECB Chief Economist Philip Lane emphasized the need for restrictive monetary policy at the Jackson Hole Symposium, acknowledging some progress in inflation control but warning that success is not guaranteed.
Investors are now closely watching the preliminary German and Eurozone Harmonized Index of Consumer Prices (HICP) data for August, set to be released on Thursday and Friday.
These figures will offer more insight into future interest rate decisions, with Eurozone annual headline and core HICP expected to have slowed to 2.3% and 2.8%, respectively.
Meanwhile, the IFO Institute's report on Monday showed that the German Business Climate, Current Assessment, and Expectations for August exceeded expectations but were still lower than July’s figures. This data did not provide any significant boost to the EUR/USD pair.
Therefore, the news heightened concerns over the Eurozone's economic outlook and potential ECB rate cuts, leading to a bearish impact on the EUR/USD pair. Despite some positive data, the uncertainty limited any significant upward movement for the euro.
EUR/USD - Technical Analysis
The EUR/USD pair is currently trading at $1.11828, reflecting a slight dip of 0.09% on the day. As we analyze the 4-hour chart, it becomes clear that the currency pair is hovering near a crucial pivot point at $1.1201.
This level is proving to be a significant battleground for bulls and bears alike, with immediate resistance sitting just above at $1.1232.
The EUR/USD has been on an upward trajectory in recent sessions, but the momentum is showing signs of fatigue as it nears overbought conditions.
The Relative Strength Index (RSI) is currently at 69, suggesting that the pair is approaching overbought territory. While the RSI hasn’t yet crossed the 70 mark, it's close enough to warrant caution.
Traders may want to consider this as a signal that the upward momentum could be losing steam. Meanwhile, the 50-day Exponential Moving Average (EMA), currently positioned at $1.1077, is still well below the current price, reinforcing the general uptrend that we’ve seen over the past few weeks.
Should the price break above the immediate resistance at $1.1232, the next hurdles to watch are $1.1266 and $1.1299.
A clear break above these levels could set the stage for further gains. On the downside, immediate support is located at $1.1150, with additional support levels at $1.1107 and $1.1072.
If EUR/USD slips below $1.1150, we might see a more pronounced correction, bringing the pair closer to the 50 EMA at $1.1077.
Conclusion: The EUR/USD outlook remains cautiously optimistic as long as the pair stays above the $1.1150 support level.
However, traders should be mindful of the near-overbought RSI. Consider selling below $1.1201 with a target of $1.1150, and set a stop loss at $1.1232 to manage risk.
Related News
GOLD Price Analysis – Aug 26, 2024
GBP/USD Price Analysis – Aug 26, 2024
Daily Price Outlook
During the European trading session, the GBP/USD currency pair maintained its upward trend and remained well bid around the 1.3225 level.
This bullish momentum is primarily driven by dovish comments from Federal Reserve (Fed) Chair Jerome Powell regarding interest rates. These remarks undermine the US dollar and contribute to the GBP/USD pair’s gains.
Powell's comments at the Jackson Hole Symposium suggest that the Fed is considering rate cuts, reflecting concerns over the US labor market's downside risks.
Fed Rate Cut Expectations and Economic Data Impact on GBP/USD
Jerome Powell, the Fed Chair, hinted that the central bank might cut interest rates to support the labor market and keep inflation around 2%.
However, he didn’t specify when these cuts might occur, stating that the decision will depend on future economic data.
This lack of clear guidance has weakened the US dollar. As a result, the Pound Sterling (GBP) has strengthened against the US Dollar (USD), pushing the GBP/USD exchange rate higher.
In simple terms, the uncertainty about the Fed’s next moves has made the USD less valuable, benefiting the GBP.
On the US front, the US Dollar Index (DXY), which measures the USD against six major currencies, recently hit a new year-to-date low of 100.53.
Investors are awaiting crucial economic data this week, including the July core Personal Consumption Expenditure (PCE) Price Index and Durable Goods Orders.
These releases will be pivotal in shaping expectations for Fed policy and, consequently, influencing the GBP/USD movement.
Bank of England’s Cautious Approach Bolsters Pound Amid Rate Cut Speculation
On the BoE front, the Pound Sterling is performing well against its major peers at the start of the week.
The British currency is gaining strength because the Bank of England (BoE) is cautious about planning rate cuts too soon, given that inflation in the UK is still a concern.
BoE Governor Andrew Bailey indicated at the Jackson Hole Symposium that while inflation pressures may be less severe than expected, the BoE should not rush to cut interest rates. He emphasized the need to be careful not to lower rates too quickly or too much.
This week, market speculation about future BoE rate cuts will guide the Pound Sterling, as there is no major economic data expected from the UK.
Currently, traders anticipate one more rate cut from the BoE this year. Although the BoE did cut rates on August 1, recent positive economic data, like the stronger-than-expected flash S&P Global/CIPS PMI for August, has lessened the likelihood of another rate cut in September.
GBP/USD - Technical Analysis
The British Pound (GBP) is currently trading at $1.31995 against the US Dollar (USD), reflecting a slight decline of 0.14% in today’s session.
On the 4-hour chart, GBP/USD is flirting with the critical pivot point at $1.3220, which has been a key level of interest for traders.
The currency pair’s recent price action suggests that the market is at a crossroads, with potential for both upward and downward movement depending on how it interacts with this pivot.
The Relative Strength Index (RSI) is hovering around 73, indicating that the pair is nearing overbought territory.
This elevated RSI suggests that the upward momentum may be losing steam, making it increasingly likely that we could see a pullback.
However, as long as GBP/USD stays above the 50-day Exponential Moving Average (EMA), currently positioned at $1.3092, the broader uptrend remains intact.
Resistance levels to watch include $1.3255 as the immediate barrier, followed by $1.3299 and $1.3340. A break above these levels could reinvigorate the bullish trend, pushing the pair toward new highs.
On the downside, immediate support is found at $1.3165, with further support at $1.3121 and $1.3078.
A breach of $1.3165 could trigger a more pronounced sell-off, potentially bringing the pair back down to test the lower support levels.
Conclusion: The market remains cautiously optimistic but is showing signs of overextension.
Traders might consider selling below the $1.3220 pivot point, aiming for a take profit around $1.3165 and setting a stop loss near $1.3255. Keep an eye on the RSI and the 50 EMA for any shifts in momentum.
Related News
GOLD Price Analysis – Aug 26, 2024
GOLD Price Analysis – Aug 26, 2024
Daily Price Outlook
Gold price (XAU/USD) managed to stop its early mild losses and regained some positive traction the $2,524.60 and approaching its all-time highs of $2,526.
However, the surge in gold prices can be attributed to a combination of factors, including rising geopolitical tensions in the Middle East and expectations of a lower interest rate regime from the Federal Reserve (Fed).
The precious metal is benefiting from increased safe-haven demand amid ongoing conflicts and a more dovish Fed outlook.
Fed Chair Powell's Speech and Its Impact on Gold Prices
Gold's recent gains were significantly influenced by Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole symposium.
Powell’s comments on the potential for future interest rate cuts have bolstered gold prices. He highlighted the cooling labor market and indicated that the Fed might reduce rates, suggesting that a lower interest-rate regime is on the horizon.
This shift in policy expectations has increased investor interest in gold, which benefits from lower yields on government bonds. Following Powell’s speech, US government bond yields fell, reducing the opportunity cost of holding non-interest bearing gold.
Market expectations for a substantial rate cut in September have surged, with the likelihood of a 0.50% reduction climbing to the mid-30% range, up from the mid-20% prior to the speech. The US Dollar Index (DXY) also fell to a new year-to-date low of 100.53, further supporting gold’s appeal as a safe haven.
Geopolitical Tensions Fuel Gold's Bullish Momentum
On the other side, the geopolitical developments have also played a crucial role in gold's price movement. Rising tensions in the Middle East, particularly the conflict between Israel and Hezbollah, have heightened demand for safe-haven assets like gold.
Over the weekend, Israel launched a significant pre-emptive strike on Hezbollah positions in Lebanon, prompting a retaliatory missile and drone attack by Hezbollah in northern Israel.
The risk of further escalation involving Iran has also contributed to increased market uncertainty and demand for gold.
This geopolitical risk has provided additional support to gold prices, as investors seek refuge in assets that are perceived as safe during times of heightened geopolitical uncertainty.
The combination of these factors—expected rate cuts by the Fed and escalating geopolitical risks—has fueled gold’s bullish momentum, with prices nearing record levels.
GOLD (XAU/USD) - Technical Analysis
Gold is currently trading at $2,510.35, reflecting a modest dip of 0.12% in today’s session. The precious metal has been struggling to gain upward momentum, and the price action suggests a cautious market.
On the 4-hour chart, Gold is hovering near the key pivot point at $2,515.43. This level is crucial as it has repeatedly acted as a barrier, preventing the price from making a decisive move either up or down.
The RSI is currently at 56, indicating a balanced market sentiment. While this isn’t an overbought level, it’s also not showing strong buying pressure, which aligns with the current price consolidation.
The 50-day EMA at $2,491.19 is providing solid support, and as long as Gold holds above this EMA, the broader trend remains intact. However, the lack of momentum suggests that any upward movement could be capped unless we see a strong push past the immediate resistance.
Speaking of resistance, the first hurdle lies at $2,531.64, followed by $2,545.87 and $2,559.32. A break above these levels could see Gold testing new highs.
On the downside, immediate support is at $2,494.37, with further levels at $2,479.52 and $2,463.26. A break below $2,494.37 could trigger a sell-off, targeting the next support zones.
Conclusion: The market sentiment remains cautious. Gold’s price action suggests a potential for further downside unless it can break above $2,515.43.
Traders might consider selling below $2,515 with a target of $2,490, setting a stop-loss at $2,531 to manage risk.
Related News
EUR/USD Price Analysis – Aug 26, 2024
GOLD Price Analysis – Aug 23, 2024
Daily Price Outlook
Gold prices (XAU/USD) extended their upward rally, gaining traction around the $2,498.40 level and reaching an intra-day high of $2,501.85. This rebound is primarily fueled by a bearish US dollar, which lost its traction on the back of dovish expectations from the Federal Reserve. The overall outlook for gold remains positive ahead of a key event: Federal Reserve Chairman Jerome Powell's speech at the central banker symposium in Jackson Hole. Powell is anticipated to affirm market expectations of a rate cut at the Fed’s September 18 meeting. Additionally, persistent geopolitical tensions continue to lend support to gold prices.
Impact of Weakening US Dollar and Fed Rate Cut Expectations on Gold Prices
On the US front, the broad-based US Dollar (USD) is losing momentum as expectations grow that the Federal Reserve (Fed) may begin lowering interest rates at its September policy meeting. Although the USD had briefly rebounded from its year-to-date low, thanks to a rise in US Treasury bond yields, this recovery has been weak. Investors are increasingly betting on an imminent start to the Fed's rate-cutting cycle, which has helped limit losses for gold (XAU/USD).
On the data side, the US Department of Labor reported that Initial Jobless Claims rose to 232,000 in the week ending August 17, slightly above the previous 228,000. A review also showed that US employers added 818,000 fewer jobs than initially reported for the year through March.
Additionally, minutes from the July Federal Open Market Committee (FOMC) meeting revealed growing support among policymakers for a rate cut next month as inflation shows signs of easing. Meanwhile, the S&P Global flash PMI pointed to a sharp contraction in the manufacturing sector, while the services sector saw unexpected growth. Some Fed officials remain cautious, expressing the need for more data before fully endorsing a rate cut.
Therefore, these developments positively impact gold prices by weakening the US dollar and increasing expectations of Federal Reserve rate cuts. Economic uncertainties highlighted by recent data boost gold's appeal as a safe-haven asset, supporting and potentially elevating its value.
GOLD (XAU/USD) - Technical Analysis
Gold is currently demonstrating strength, trading at $2,492.85, up 0.33% for the day. The key pivot point at $2,503.37 will be crucial in determining gold's next move. Immediate resistance lies at $2,520.98, with further resistance levels at $2,540.75.
On the downside, support is found at $2,475.81, with additional levels at $2,450.95 and $2,432.88. The Relative Strength Index (RSI) is at 48, indicating neutral momentum, while the 50-day Exponential Moving Average (EMA) at $2,485.74 provides underlying support.
If gold manages to break above the $2,503.37 pivot point, it could sustain its upward trend, potentially reaching the $2,520.98 resistance level. However, if the price falls below the $2,475.81 support level, it could signal a deeper correction.
Conclusion: Consider buying above $2,480, with a target of $2,505 and a stop loss at $2,462. This strategy offers a balanced risk-to-reward ratio, especially if gold maintains its upward momentum.
Related News
- EUR/USD Price Analysis – Aug 23, 2024
S&P500 (SPX) Price Analysis – Aug 23, 2024
Daily Price Outlook
The global market sentiment has shown a bearish trend, as evidenced by the performance of the S&P 500 index. The S&P 500 fell 0.9% to around 5,570.64, hitting an intra-day low of 5,560.95. The index is attempting to limit its losses, with attention turning to an address by Federal Reserve Chair Jerome Powell for more cues on the bank’s plan to cut interest rates.
The S&P 500's decline is driven by concerns over a potential recession due to a cooling labor market and anticipated Fed rate cuts, which have raised fears of slower economic growth impacting corporate earnings. Additionally, ongoing geopolitical tensions, notably the conflict between Israel and Gaza, have further pressured the S&P 500 index.
S&P 500 Faces Pressure from Recession Concerns and Fed Rate Cut Uncertainty
On the US front, the S&P 500 index is facing pressure amid growing expectations that the Federal Reserve may start lowering interest rates at its September meeting. Recent US economic data, including rising Initial Jobless Claims and a downward revision in job numbers, has increased concerns about a potential recession.
The S&P Global PMI indicated a sharp contraction in manufacturing, while the services sector showed unexpected growth, adding to market uncertainty.
Fed Chair Powell’s upcoming speech at the Jackson Hole Symposium is expected to provide more clues about potential rate cuts. Markets are already pricing in a rate reduction, which, combined with recent signs of a cooling economy, is raising fears of a slowdown.
This environment has put additional pressure on the S&P 500, as investors worry about the broader economic impact and potential for lower corporate earnings.
Therefore, the S&P 500 is under pressure due to growing concerns about a potential recession and uncertainty from upcoming Fed rate cuts. Rising jobless claims, a revised downward jobs report, and mixed economic indicators heighten fears of economic slowdown and lower corporate earnings.
Geopolitical Tensions Between Israel and Gaza Impact S&P 500 Index
On the geopolitical front, ongoing tensions between Israel and Gaza are causing significant uncertainty. Recent developments, such as ceasefire talks and intensified conflict resulting in over 40,000 deaths in Gaza, have heightened global risk aversion.
These geopolitical tensions are negatively impacting the S&P 500 index. As investors respond to the increased risk and instability, they may reduce their exposure to equities.
This cautious sentiment and the broader market uncertainty contribute to the downward pressure on the S&P 500, exacerbating existing concerns about economic conditions.
S&P 500 - Technical Analysis
The S&P 500 is currently trading at $5,570.65, reflecting a decline of 0.89% on the day. The index has been under pressure, struggling to maintain momentum above the key pivot point at $5,584.24.
The recent pullback suggests that the bulls are losing steam, and the market may be preparing for a further downward correction. Immediate resistance is noted at $5,699.82, followed by $5,754.94, levels that need to be breached for the index to resume its upward trajectory.
On the downside, the first line of defense for the bulls lies at $5,515.94, with stronger support at $5,441.61 and $5,381.03, which could come into play if selling pressure intensifies.
Technical indicators are painting a cautious picture. The Relative Strength Index (RSI) is edging lower, signaling that the market may be entering oversold territory, which could spark a near-term bounce.
However, the 50-day Exponential Moving Average (EMA) at $5,449.29 is crucial, as it has acted as a significant support level in recent weeks. A close below this EMA could accelerate the downward momentum, pushing the index toward the lower support levels mentioned.
Given the current setup, the S&P 500 appears vulnerable to further declines unless it can reclaim the pivot point at $5,584.24 and move decisively higher.
Traders should monitor the $5,515.94 support closely, as a break below this could open the door to a deeper correction. Conversely, if the index manages to stay above $5,515.94, we might see a consolidation phase before any significant move.
Related News
- GOLD Price Analysis – Aug 23, 2024
EUR/USD Price Analysis – Aug 23, 2024
Daily Price Outlook
During the European trading session, the EUR/USD currency pair made a modest recovery, edging higher to near 1.1113, hitting the intra-day high of 1.1132 level.
This upward movement was largely driven by a weaker US dollar, which dropped as traders shifted their focus to Federal Reserve (Fed) Chair Jerome Powell’s anticipated speech at the Jackson Hole Symposium. The US dollar resumed its recent weakness following a brief recovery, amid caution ahead of Powell's remarks.
Meanwhile, the expectations that the European Central Bank (ECB) might cut interest rates further in September also contributed to the euro's gains. However, increasing expectations of further ECB rate cuts could limit the upside potential for the EUR/USD pair.
Impact of Federal Reserve's Anticipated Guidance on EUR/USD Amid Weak US Dollar
Despite the stronger-than-expected US S&P Global PMI report for August, which showed a robust expansion in the services sector and a slight contraction in manufacturing, the US dollar edged lower.
The market anticipates that Jerome Powell will provide fresh guidance on interest rates and the US economic outlook during his Jackson Hole speech. Federal Reserve officials have hinted that a rate cut in September may be appropriate if economic data continues to align with expectations.
This dovish sentiment is likely to influence the EUR/USD pair, potentially weakening the dollar further against the euro if Powell’s remarks suggest a more accommodative monetary policy stance.
Anticipated ECB Rate Cuts and Their Impact on EUR/USD Outlook
On the EUR front, the European Central Bank is widely anticipated to cut interest rates again in September, driven by uncertainties over the Eurozone’s economic outlook and lower wage growth.
The recent flash Eurozone HCOB PMI report for August showed improved business activity, but this positive signal may be short-lived due to weak foreign demand, especially in Germany. The decline in Q2 Negotiated Wage Rates, which eased inflation concerns, has bolstered expectations for more ECB rate cuts.
As such, while the EUR/USD pair benefits from a weaker US dollar, the potential for additional ECB rate cuts could limit further gains. Traders are now looking ahead to Powell’s speech for fresh direction and weighing the implications of ongoing economic developments on the EUR/USD outlook.
EUR/USD - Technical Analysis
The EUR/USD is currently holding steady at $1.11136, showing a modest increase of 0.01% for the day. The pair is navigating a relatively narrow trading range, with the pivot point resting at $1.11092, acting as a critical level for determining the short-term direction.
As we look at the 4-hour chart, the immediate resistance is marked at $1.11644, followed by higher levels at $1.11910 and $1.12238. On the downside, immediate support can be found at $1.10769, with further support levels at $1.10491 and $1.10194.
The technical indicators offer a mixed picture, with the RSI sitting at 58, signaling neutral momentum that could sway in either direction depending on the upcoming price action.
Meanwhile, the 50-day EMA at $1.10510 is providing solid support, indicating that the pair is maintaining a bullish bias above this level.
If the EUR/USD manages to break above the $1.11644 resistance, we could see a continuation of the upward trend, potentially driving the price toward the $1.11910 level.
However, if the pair fails to hold above the $1.11092 pivot point, a decline toward the $1.10769 support level could be on the cards. Traders should be cautious, as a break below $1.10769 might trigger a deeper correction.
Related News
- GOLD Price Analysis – Aug 23, 2024
USD/JPY Price Analysis – Aug 22, 2024
Daily Price Outlook
During the European trading session, the USD/JPY currency pair gained ground and remained well bid around 145.87 level, hitting the intra-day high of 145.91 level.
However, the reason for its upward momentum was supported by the US Federal Reserve's (Fed) indication of a possible rate cut in September, coupled with Japan's trade deficit data that dragged the Japanese Yen (JPY) lower.
Moving ahead, traders are closely monitoring upcoming US economic reports, such as Weekly Initial Jobless Claims and Existing Home Sales.
These data releases are crucial as they offer insights into the US economy and can create short-term trading opportunities by potentially influencing market movements.
US Dollar Gains Strength Amid Fed Rate Cut Expectations
On the US front, the broad-based US dollar has recently gained strength, ending a four-day decline. However, the Fed Minutes released on Wednesday revealed that most Federal Reserve officials are leaning towards a rate cut in the upcoming September meeting, provided inflation continues to cool.
The Fed has kept its benchmark rate at 5.3% since July 2023, and markets are anticipating a cut of up to a full percentage point by the end of the year.
Despite the US dollar gaining traction from a slight recovery in Treasury yields, this anticipation of a rate cut might weigh on the USD and limit the upside potential of USD/JPY in the near term.
Mixed Japanese Data and BoJ Rate Hike Expectations Provide Limited Support for JPY
On the other hand, Japan's economic data and expectations for the Bank of Japan (BoJ) are providing some support for the USD/JPY pair.
On the data front, the Jibun Bank Manufacturing PMI for August rose to 49.5, slightly below the expected 49.8, while the Services PMI improved to 54.0.
Although these figures highlight a mixed economic outlook, they are overshadowed by Japan's record trade deficit, which has weakened the Yen.
Moreover, economists anticipate that the BoJ might raise interest rates by the end of the year. However, the Reuters poll indicates a median forecast of a 0.50% rate at year-end, marking a 25 basis points increase.
The market will closely watch BoJ Governor Kazuo Ueda's speech on Friday for any hawkish remarks that could lift the JPY against the USD.
Therefore, the mixed Japanese economic data and expectations of a BoJ rate hike may offer limited support for the JPY. However, Japan’s record trade deficit weakens the Yen, likely keeping the USD/JPY pair stronger in the near term.
USD/JPY - Technical Analysis
The USD/JPY pair is experiencing a modest uptick, trading at $145.486. The pair is hovering near a crucial pivot point at $146.1270, which will play a key role in determining the next direction.
If the price fails to sustain above this level, the downside risks could increase, with immediate support at $144.3320, followed by $143.2110 and $141.7870.
On the upside, if the pair manages to break above the pivot, it could face resistance at $147.3240, $149.3650, and ultimately $150.9000. The RSI is currently at 41, indicating a neutral to slightly bearish sentiment.
Additionally, the 50-day EMA at $146.9510 suggests that there’s room for further downside correction if the current momentum does not pick up.
Conclusion: Consider selling below $146.161, targeting $143.998 with a stop loss at $147.340.
Related News
AUD/USD Price Analysis – Aug 22, 2024
AUD/USD Price Analysis – Aug 22, 2024
Daily Price Outlook
Despite the hawkish sentiment surrounding the RBA's rate trajectory, the AUD/USD currency pair failed to sustain its early-day upward momentum and turned bearish around the 0.6738 level, hitting an intra-day low of 0.6727.
This downward trend can be attributed to the mild renewed strength of the US dollar, which gained traction following a slight recovery in Treasury yields on Thursday.
On the positive side, Australia's Judo Bank Composite PMI increased to 51.4 in August, fueled by stronger service sector growth.
However, the downside of the AUD/USD pair could be limited due to the hawkish stance adopted by the Reserve Bank of Australia (RBA) regarding its policy outlook.
RBA's Hawkish Stance and Strong Services PMI Support AUD/USD Pair
On the AUD front, the downside of the AUD/USD pair may be limited due to the Reserve Bank of Australia's (RBA) hawkish stance. The RBA's August Meeting Minutes revealed that the cash rate is likely to remain unchanged for some time.
Earlier this month, the board considered raising rates but decided that holding steady would better manage risks.
RBA Governor Michele Bullock emphasized that the central bank is ready to raise rates again if necessary to combat inflation. This decision marks the sixth consecutive meeting where the RBA has kept rates at 4.35%.
On the data front, Australia's Judo Bank Composite PMI rose to 51.4 in August, up from 49.9 in July, indicating the fastest expansion in three months.
This improvement was driven by a stronger services sector, even though manufacturing continued to decline. Meanwhile, the Services PMI increased to 52.2 in August from 50.4 in July, showing the fastest growth in services output in three months.
However, the Manufacturing PMI slightly rose to 48.7 from 47.5, indicating a continued, though slower, contraction in the sector for the seventh month in a row.
Therefore, the news is likely to support the AUD/USD pair. The RBA's hawkish stance and steady rates, combined with strong service sector growth, provide a positive outlook for the Australian dollar, despite ongoing manufacturing sector weakness.
Impact of US Rate Cut Expectations and Fed Caution on AUD/USD Pair
On the US front, the US Dollar (USD) gained slightly due to a minor recovery in Treasury yields on Thursday. However, it faced some challenges as the FOMC Minutes for July indicated that most Federal Reserve officials are likely to cut the benchmark interest rate in September.
Traders are closely watching Fed Chair Jerome Powell's upcoming speech at Jackson Hole.
According to the CME FedWatch Tool, the likelihood of a 25 basis point rate cut in September is now about 65.5%, down from 71.0% a day earlier. Meanwhile, the chance of a 50 basis point cut has increased to 34.5% from 29.0%.
Furthermore, Federal Reserve Governor Michelle Bowman expressed caution on Tuesday about making policy changes too quickly, citing risks to inflation. She warned that reacting too strongly to single data points could harm the progress made.
Meanwhile, Minneapolis Fed President Neel Kashkari suggested that discussing potential rate cuts in September might be appropriate due to concerns about a weakening labor market.
Therefore, the news could lead to a stronger AUD/USD pair as the expectations of a Fed rate cut, combined with ongoing caution from Fed officials, may weaken the USD, while the prospect of lower interest rates supports the Australian dollar.
AUD/USD - Technical Analysis
The AUD/USD pair is showing signs of strength, currently trading at $0.67517. The pivot point at $0.6772 will be crucial in determining whether the pair can sustain its upward momentum. Immediate resistance is at $0.6754, with further hurdles at $0.6771 and $0.6792.
If the price breaks above these levels, the pair could see further gains. On the downside, immediate support is found at $0.6714, followed by $0.6684 and $0.6666.
The RSI is nearing overbought territory at 69, indicating that the bullish momentum may soon face some resistance.
However, the 50-day EMA at $0.6662 is supportive, suggesting that the underlying trend remains positive.
Conclusion: Consider buying above $0.67372, with a target of $0.67715 and a stop loss at $0.67143.
Related News
USD/JPY Price Analysis – Aug 22, 2024
GOLD Price Analysis – Aug 22, 2024
Daily Price Outlook
Gold prices (XAU/USD) failed to stop its downward trend and remained well offered around 2,509.22 and hitting an intraday low of 2,499.44.
This decline is mainly because the US dollar has strengthened again after falling for four days. Meanwhile, the strong global financial markets are making gold less attractive as a safe investment.
However, if the Federal Reserve is expected to be less aggressive with interest rates, it might slow down the US dollar's rise and help gold avoid further losses.
Meanwhile, the delay in peace talks between Israel and Hamas increases the risk of a wider conflict in the Middle East, making investors more cautious.
This uncertainty could boost gold prices, as investors often turn to gold for safety during times of geopolitical tension.
Moving ahead, traders are paying close attention to upcoming US economic reports, like Weekly Initial Jobless Claims and Existing Home Sales.
These data releases could create short-term trading opportunities, as they provide insights into the US economy and may influence market movements.
US Dollar Strength and Fed Rate Cut Expectations Support Gold Prices
On the US front, the US Dollar has recently gained strength, ending a four-day decline. However, expectations that the Federal Reserve might take a more cautious approach could limit the dollar’s rise and support gold prices.
Recent data revealed that US job growth was weaker than expected, with 818,000 fewer jobs added than initially reported.
This weaker job growth has led to speculation that the Federal Reserve might begin cutting interest rates soon, possibly as early as September.
Furthermore, the minutes from the July 30-31 Federal Reserve meeting showed that many officials were in favor of a rate cut in September, with some wanting action right away.
This has increased market expectations for a 50 basis points rate cut next month to 38%, up from 29% the day before.
As a result, gold prices have been supported, as a potential rate cut would likely weaken the US Dollar and make gold more appealing as it doesn’t earn interest. This news has helped keep gold prices stable above $2,500.
Ongoing Israel-Hamas Conflict Boosts Gold Prices Amidst Geopolitical Uncertainty
On the geopolitical front, the ongoing Israel-Hamas conflict remains unresolved, raising fears of a wider Middle Eastern conflict. This uncertainty has boosted gold prices, as investors look for safe places to invest.
The situation has worsened with new Israeli military actions in Deir el-Balah and a tragic attack on a school-turned-shelter in Gaza, causing several casualties.
Meanwhile, US President Joe Biden has urged Israeli Prime Minister Benjamin Netanyahu to agree to a temporary ceasefire, but negotiations have stalled.
The ongoing conflict, which has resulted in tens of thousands of deaths and many injuries, continues to create market uncertainty. This volatile situation is keeping gold prices stable, as investors seek safety in gold amid the ongoing instability.
GOLD (XAU/USD) - Technical Analysis
Gold has been trending lower, currently trading around $2504.035, as bearish sentiment prevails in the market.
The pivot point at $2507.75 is crucial for determining the next move. If prices remain below this level, we could see further declines towards the immediate support at $2491.41, followed by $2480.08 and $2461.98.
On the upside, breaking above the immediate resistance at $2526.46 could open the door for a move towards $2540.75 and $2556.71.
The RSI at 53 suggests that the market is neither overbought nor oversold, but leaning slightly towards a bearish bias.
The 50-day EMA, currently at $2481.3620, is providing additional support, making this level key for further downside movement.
Conclusion: Consider selling below $2506 with a target of $2480, placing a stop loss at $2530.
Related News
USD/JPY Price Analysis – Aug 22, 2024